Whether you're just getting started in the market or have been investing for a while and have some extra cash to deploy, it can often be challenging to figure out what stocks to buy. And when you're working with smaller sums, solid investment options can feel even more difficult to uncover.

One stock that's trading for under $100 and has solid long-term growth prospects is the consumer lending company LendingClub (LC 0.68%). Since going public, it has undergone a transformation, and things are beginning to look up for the fintech. Its strategic decision to purchase a digital-only bank enhances everything that LendingClub can offer customers.

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LendingClub's three-step plan to expand

LendingClub brought installment loans into the digital age with its peer-to-peer lending platform. However, in 2014, revelations came out that the CEO had violated the company's rules on loan sales. The resulting scandal forced him to step down in 2016. And in April 2018, LendingClub was charged by the Federal Trade Commission with falsely promoting loans with "no hidden fees."

Through November 2020, the stock had fallen by 96% in value from where it IPOed in December 2014.

But LendingClub has undergone a transformation, and management has laid out a three-step plan to drive long-term growth: Grow interest income by owning loans, grow its customer base, and add new products.  

The most significant shift to LendingClub's business was its purchase of Radius Bancorp, which closed in February. The acquisition gives LendingClub a digital bank, and provides it with an open application programming interface (API) through which it can offer banking-as-a-service functions. Banking-as-a-service is a way for banks to open up their APIs to third parties who can then build new services. This could open up new revenue streams for Lending Club.  

However, the most significant benefit to LendingClub is that it can now hold loans on its books and collect recurring interest income. The loans it keeps on its books end up being three times more profitable in the long run than the loans it sells. Right now, management says its goal is to retain 15% to 25% of the loans it makes.

Executing this plan has one caveat. Growing LendingClub's loan portfolio will reduce its income in the near term because origination fees are deferred, and the company must set aside funds as loan-loss provisions. 

Earnings improved drastically from 2020

Net revenue in the third quarter was $241.2 million, up 246.5% from the prior-year period. This growth was driven by non-interest income -- its origination fee-type of revenue -- which grew 213% to $180.9 million. Interest income -- which management is working to increase in the coming years -- was up 77% to $82.9 million. Through the first three quarters of 2021, its net revenue of $556.4 million was up by 129.4% year over year.  

Loan originations in the third quarter totaled $3.1 billion, up 14% from the previous quarter, and $636 million of loans were held for investment, up from $541 million held as investments in the prior quarter. 

Over the next 12 to 18 months, it plans to grow interest income from these loans, which will deliver higher profits that it can then invest in infrastructure and new products. One area in which it is expanding is auto loans. In the third quarter, its auto refinance originations grew by 85% quarter over quarter. It's also working on a "buy now, pay later" business for purchases like elective medical, dental, and educational expenses. 

A solid investment

Consumer lending has been a robust business in 2021, with companies like Upstart Holdings, SoFi, and LendingClub leading the charge. Those strong trends are expected to continue in 2022. According to TransUnion, in the second quarter, unsecured consumer loan balances rose quarter over quarter for the first time since the pandemic began. "These positive trends signify health in the personal loan market, with many lenders looking to ramp up originations to meet renewed consumer demand," said Transunion in a press release.  

LendingClub is positioned well heading into 2022. A robust personal loan market will serve as a tailwind for its business as it executes its long-term plan. The company made sacrifices over the past few years as it built up efficiencies and purchased Radius Bank, and it continues to make sacrifices as it builds its loan portfolio. This kind of commitment to long-term success is making the company a solid turnaround story -- and a stock worthy of a spot in your portfolio.